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Court dismisses appeal against tribunal’s findings of fact dressed up as appeal on law

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ST Shipping & Transport Pte Ltd v. Space Shipping Ltd (CV Stealth) [2017] EWHC 2808 

This case is an example of how a routine charterparty can go horribly wrong, with nightmares for the owners and the charterers, even if they are both innocent of any wrongdoing.  On the legal side, it provides a useful summary of the test of causation – the cause of a loss – where there is more than one potential factor. It also takes an interesting "wait and see" approach to dealing with potential savings where it is too soon to assess them. And it shows again the courts' refusal to re-open issues of fact that have been put by the parties to arbitration. Unless the arbitrators make errors of law, their decision on factual issues is for them and them alone.

The background facts

In 2014, the disponent owners (the Owners) let the vessel to the Charterers for a period of eight months. The sub-charterers ordered the vessel to load cargo at the port of Puerto La Cruz in Venezuela. The vessel arrived at the load port in September 2014 and remains there. She has not loaded any cargo and has been detained for more than three years by the Venezuelan authorities.

The sub-charterers were responsible for the ongoing detention. It transpired that the loading documents were not genuine, so the authorities detained the vessel and ordered a criminal investigation. As the Commercial Court records in its judgment, there is nothing to suggest that the Owners or the Charterers had any involvement in any wrongdoing. 

The arbitration award

The award is the fourth award in the story. And it appears from the Court judgment that there may be more to come. 

The arbitrator was asked to look at two main issues. First, the Owners claimed continuing losses – hire, and expenses caused by the detention. Secondly, the Charterers said that any sums nominally payable to the Owners should be offset by a saving that the Owners would make. As disponent owners, they would become liable to pay drydocking costs of more than US$1 million when they redeliver the vessel to the head owners under the bareboat charter. The Charterers maintained that because there were issues about whether the vessel had been abandoned to her underwriters, or had become a CTL, or simply because the head charterparty had become frustrated, the disponent owners might never have to pay those drydocking costs. 

The Commercial Court decision

Charterers' appeal – whether their employment order could still be said to be the cause of the continued arrest of the vessel

The arbitrator had ruled in one of his earlier awards that the cause of the detention was the Charterers' order to send the vessel to Puerto La Cruz. Reviewing it in this latest award, he held that the position had not changed. 

The parties did not disagree on the legal test of causation. It is whether the employment order was an effective cause of the continued detention. It need not be the cause, i.e. the sole cause.

Where different causes exist, and one has to be selected as an effective cause, the choice is one of fact. So there is only room for appeal if the arbitrator could not have ruled as he did had he applied the law correctly.

Even the Charterers did not contend that the arbitrator would necessarily have reached a different conclusion if he had applied the correct test. They said merely that he might have done – that he might have decided that the Venezuelan authorities' continued detention had replaced the employment order as the effective cause. 

The Commercial Court ruled that the arbitrator had not misunderstood or misdirected himself on the law. His ruling was perfectly sound and not open to review. This was really an appeal against findings of fact, dressed up as an appeal on law. There was no need and no room to overturn the award.

Owners' appeal – whether the saving of drydocking costs resulting from the vessel's detention should be deducted from their claim for damages

Early on in the case, the arbitrator set aside a sum of US$1.4 million, taking a "wait and see" approach. He maintained this decision in the latest award. He said that the drydocking expenses would be a saving for the Owners in the event that the vessel is never released – but if she is and the Owners incur the drydocking costs, then it would be open to them to ask for a further award.

The ruling had great significance for the parties. In his latest award, the arbitrator ruled that the Owners were entitled to a sum of US$800,000 for expenses incurred during the detention. So if the likely drydocking costs are offset against those expenses, the Owners will be entitled to nothing. 

The Court endorsed the arbitrator's ruling, saying that it was principled and sound. Under the principles governing interim awards, he was entitled to defer a final ruling on issues that he thinks are best resolved in the light of the outcome of future happenings. 

Comment

Our main comments are at the beginning of this article. The case also reminds us that arbitration awards should only be challenged under Section 69 of the Arbitration Act 1996 on points of law.

The Court's endorsement of the arbitrator's "wait and see" approach, where quantum is dealt with in stages, is interesting. Usually you bring one claim for the entirety of the damages suffered. You may not always be entitled to bring a second action for future losses later on, so you sometimes have to assess those future losses even before they arise, even if that involves a degree of speculation about future contingencies. The approach taken here is different.

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